3 Thoughts About Grocery-Anchored Centers

We sat down recently with Phillips Edison CIO Hal Scudder (here with his wife Carol and son Sam, the graduate) to ask him whether grocery-anchored shopping centers still have the mojo they’ve had throughout the recession ("people gotta eat" being the mantra). He says yes, and he's practicing what he preaches. The Cincninnati-based company has been buying grocery-anchored properties at a brisk pace around the country (though he assures us he's not just in search of decent kumquats), including the Chicago area (in Bensenville, most recently).

1) CHICAGO'S STILL GROWING

There's still growth in infill suburban Chicago neighborhoods, and some neighborhoods are in transition, Hal tells us. Both of those situations create opportunities for buyers of grocery-anchored centers, provided they’re well-located in those neighborhoods. As an area reinvents itself economically, all the local boats are lifted, including the grocery-anchored properties.

2) THERE'S PLENTY OF ROOM

The Chicago area has room for a range of grocery store players because the overall market is somewhat fragmented. There are some strong nationals, as well as strong locals, and other banners entering the market. But that doesn't diminish the potential for finding strong investment properties. In Chicago, it isn't just how much market share a banner commands in the entire metro area, but also how strongly it performs in its own trade area.

3) THERE'S COMPETITION, BUT OPPORTUNITY

The competition to acquire these properties is stiff, but not impossibly so. Some investors are only looking for upscale properties in upscale areas, but Hal says that returns from well-located grocery-anchored centers in most areas will be strong. They don't have to be in top-decile neighborhoods to make money.